The Difference Between Piracy and Stealing

Tuesday, 2004-01-27; 19:12:00

MacCentral recently ran a story about how Mac game companies deal with the piracy of their products. Since CD and now DVD burners are booming and broadband use is increasing, it's very easy for game pirates to download and play full versions without paying for the products. The CEOs of three major game companies, MacSoft, Aspyr, and MacPlay, all said that piracy is a big problem in the Mac gaming market, and it has been affecting their bottom line significantly.

Indeed, piracy isn't a problem with just the games market. Many other software makers like Adobe and even Apple are having trouble with piracy. Many Mac users were concerned with reports about a year ago that Apple was considering integrating copy protection into Panther, given that Jaguar and Panther pre-releases were widely distributed on the internet. Piracy is even a problem in the content market, concerning services like the iTunes Music Store: despite obvious other causes for the decline in sales, the RIAA does have a right to ensure that it's content doesn't get distributed without users paying for the ability to use that content.

The major response that software and content providers have with regards to piracy is to integrate copy protection into the content or software, making it much harder to pirate it. Unfortunately, at the same time, it shackles fair use rights of those users that legitimately bought the product. A case that the MacCentral article references is Halo: Destineer Studio's President (which is the parent company of MacSoft) Peter Tamte said that MacSoft was forced to implement the CD requirement for version 1.0.3 of Halo, because he claims that "MacSoft has witnessed more people stealing Halo than have purchased it". The result is that many legitimate users of Halo are now forced to be chained to the CD whenever they want to play their favorite game.

This isn't the right way to go about fighting piracy.

The first problem with this line of thinking is the way that companies justify the use of increased copy-protection. Tamte claims that from extrapolation of file-sharing activity on the net, "the lost sales [for MacSoft] are already in the millions." Unfortunately, Tamte makes just a tiny little error in his justification: MacSoft did not lose any money because of piracy.

There is a big difference between what is now known as "piracy" and stealing. Stealing does constitute a direct loss of sales for a company. Stealing entails physically going to a store, taking something off a shelf, and walking out of the store without paying for it. In doing so, the thief takes tangible goods out of the store. It cost the company something to manufacture the packaging, to burn the CD, and to ship it to the store. Furthermore, the removal of that item from the store's shelf means that another potential customer may come in and find the shelf empty, in which case that potential customer will be unable to buy the product. The result of this is that the customer may end up buying a different product simply because the store was sold out of the original item. In this case, the thief has a direct, tangible effect on the revenues of a company.

Piracy is a totally different thing. With piracy, the pirate sits in his chair at his computer, looks on file sharing services for a copy of the full version of the software, and usually waits a few hours for it to download. It's true that the pirate is getting goods without paying for them, and that it's a morally unacceptable action. But that doesn't mean that he cost the company any money.

See, when a pirate downloads a full version of a piece of software, the pirate isn't leeching bandwidth from the company's servers. The pirate has to download the software from some other person who has already purchased it. So bandwidth costs because of the pirate are zero for the company. Furthermore, the pirate isn't depriving any other potential customer of the game: he has not physically removed a copy of the software from a store shelf. There's no loss of sale for the company there, either. Finally, the software company paid absolutely nothing for the packaging or manufacturing of the product. Given the nature of computer software, it was downloaded from someone else's computer; so no manufacturing was needed.

It could be argued that piracy amounts to lost sales because a pirate would be motivated to buy the software if he couldn't download it. However, given that pirates go out of their way to search the internet for pirated copies and to wait for the software to finish downloading, it's still highly unlikely that they would have ever bought the software, whatever the circumstances. Pirates don't want to go to the store, and they don't want to pay money for software. So this can't be legitimately construed as a loss of revenue.

It's unfortunate that groups like the RIAA and other software companies equate piracy with stealing. They are different, and people need to understand this. They are not the same thing. Piracy is not stealing. Piracy is simply downloading without authorization. There is no loss of revenue, and there is no loss of other potential customers.

So when a company like MacSoft claims that their lost sales due to piracy rank in the millions of dollars, don't buy it. It's a bogus argument. MacSoft considers every single case of piracy to be a lost sale, whereas in reality, preventing most of those piracy cases probably would not result in a noticeable increase in sales. This sort of argument from companies like MacSoft just diverts blame from the real causes of revenue loss to the pirates. It's akin to the RIAA claiming that their lost sales are due to pirates, when in reality, it's because of high prices, decline in number of albums on the market, and a decline in the quality of music. The argument just doesn't stack up.

That does not mean that piracy is morally acceptable, however. Indeed, piracy is not right, since you are using the good or service originally provided by the company without legitimately paying for it. Just as stealing is wrong, piracy is wrong, too.

So just as with the RIAA's problem, there's an entirely different and much more successful way of dealing with piracy: compete with it. Remember how Steve Jobs introduced the iTMS by showing how it's music download service was a much more reliable alternative to the "underbelly" of file sharing? Software companies need to do the same thing: they need to discourage the use of piracy not by implementing draconian copy protection measures, but by offering quality software in a convenient, acceptable manner. So, as a customer, here is some free advice to software companies that I can provide to reduce piracy.

1. Offer software at a reasonable price. MacPlay President Mark Cottam is quoted in the MacCentral article as saying, "We can't afford to throw A-list software out there at a low price point and expect to make our money back. There are development and licensing costs we have to recoup." Of course we expect that game companies price their products so that they can recoup their costs. But pricing it above many people's budget is just asking for piracy. Cutting the price by $5 or $10 may cut into the profit margins, but it encourages more people to buy the product. In the case of software, there is only a minimal cost of packaging once the game has been fully developed, so most of the revenue gained from software sales is pure profit. That means that the companies can benefit from simple laws of economics: the lower the price, the higher the demand.

Software companies can similarly counter the problem of pricing by offering educational discounts. While offering educational discounts for games in particular may seem a bit backward, the point of an educational discount is to allow poor, broke college students to afford software, too. The majority of the money they make usually goes towards education, so they won't be able to afford nearly as much software as a normal consumer.

2. Provide an easy, effortless way to buy and access the software. Online purchasing is pretty convenient, but many people don't want to wait the week or so that software usually takes to ship. They want instant gratification. Software companies could combat this cause of piracy by offering digital downloads: indeed, many shareware companies ONLY offer digital downloads and simply offer registration codes to unlock the full use of a product once it's downloaded. Commercial software distributors could provide full version downloads once the software has been purchased. That way, the customer gets what he bought immediately.

3. Provide a tryout version of the software, releasing it concurrently with the full version. All shareware products, by definition, are both demos and full versions of the product. This allows customers to evaluate the software before purchasing it. Already many commercial software manufacturers offer limited versions, too. But usually, it's too little, too late. Customers don't want to wait months to try out the software after it's already been on the market. That's doing a big disservice to your customers: they should be entitled to try out a product before buying it.

Offering money-back guarantees is not the same as offering a demo. Many kids like to try out software to see if they like it before they prod their parents into buying the software. This is especially the case with games. If they had to convince their parents to purchase it first, and find out only then if they like it or not, then it's their parents who have the job of getting the money back. It's not only kids, but normal customers who dislike this prospect, too. With money-back guarantees, it's the CUSTOMER's money on the line, not the company's. It's the customer's responsibility to contact the software manufacturer to return the product on his own time, and there's always the possibility of being forced to argue with a customer service representative, or forgetting to return the product within the specified time period. Money-back guarantees does not a demo make.

Similarly, offering a demo to customers a few months after the product was initially released is basically just insulting your customers. By doing so, you expect them to buy your product without first trying it out. Later, when you release the demo, it's like saying, "So you bought our product and returned it, and wasted some of your time? Well if you had waited, you could have evaluated our software with this demo. Enjoy!" Great way to keep your potential customers interested in your products.

Demos need to be offered the day that the full version of the product is released. While creating demos is not a trivial task, it is not a difficult one, either. Demos are just a stripped down version of the full product, so mainly what software companies have to do is rip out a bunch of files and a bunch of features and create the literature for the demo. The development time for a demo is just a fraction of the development time for the full version of a product -- so why can't software companies (particularly game companies, like the ones referenced in the MacCentral article) provide a demo release along side the release of the full version? You'll entice more customers by offering them a bit of use, and in return, your customers will be more likely to buy the product from you. Just like Mac users are annoyed when they have to wait longer for a piece of software than their PC friends, so do all customers get annoyed when they have to wait for a demo.

4. Integrate reasonable copy protection that doesn't get in the way of legitimate users. A limited amount of copy protection does need to be integrated into software, because it's no secret that putting up a small fence will go a long way in stopping piracy. But erecting a sky-high metal wall isn't the answer either, and many software companies err on that side of copy protection. The protection is there not to treat your legitimate customers like pirates; it's to put up annoying barriers to your illegitimate customers so either they can't use your product, or they'll go out and buy it.

Again, returning to the case of Halo and the 1.0.3 update, MacSoft added the requirement of having the CD mounted in order to play the game. While it may seem a trivial annoyance, many people have to struggle to find their CD, for whatever reason. It's a real annoyance to some people, and the outcry over this requirement in many forums speaks volumes as to what customers find acceptable. Can't software manufacturers find more elegant ways to make sure the installed product is a legally obtained one? Perhaps they can take a lesson from the shareware community: provide registration keys that are tied to personal information, so people are MUCH less likely to give out their codes. Maybe require the CD-ROM to be in the drive of most computers, but allow a limited number of "primary" computers to download a file that negates the CD requirement. Or maybe the simplest way to do it is to keep an online database of registration codes, and require a connection to the company's server every time the software is installed.

The easiest way to see what copy protection people will accept is to simply test it out on your customers. If your customers complain, maybe it isn't such a good idea. And don't get overzealous with implementing copy protections: for example, don't require a verification of the registration code on every launch of the program -- what happens if the user's internet connection is down? Will they be forced to wait until it comes back up in order to use the software? Make sure you consider the fair use of your legitimate customers BEFORE you implement certain copy protections, NOT after.

5. Allow broad use of a legitimately purchased product. One person in the MacCentral forums complained about Halo because he couldn't install it on all the computers in his house in order to have a network game -- he would have been forced to buy multiple copies in order to play network games in his own house! That's a ridiculous requirement, and an easy one to get around. Witness StarCraft, one of Blizzard's best games ever. It allowed the creation of "spawn" installs of StarCraft. These limited installs of the game ONLY allow network play, and only when connecting to a game that had a CD inserted into the drive. That means that a person who bought a copy of the game could even install a spawned copy of the game on a friend's computer, and then he would be able to play a modem game with that friend whenever he wanted. But once the network game ends, the friend can't play the game anymore, since he hasn't purchased it. This is an innovative way of allowing legitimate users more fair use. So why haven't other game companies followed Blizzard's lead?

6. Don't hype your software. NEWS FLASH: people don't like having to wait for a product. So they similarly don't like it when a company announces a product, and then takes a long time to ever get it to market. By the time that piece of software does come out, people may get annoyed with the hype, lose interest, or pirate the software because they think that the company deserves it for delaying the product. Yet again, Halo is a case in point. While not directly MacSoft's fault, Bungie had originally showcased Halo way back in 1999! It was hyped and hyped and hyped and when it finally got to market 4 years later, people were disappointed. The product has ridiculously high software requirements, and it isn't particularly impressive compared to other games like Unreal Tournament, for example. While many may dispute this fact, they can't deny that the hype for Halo has lost sales. MacSoft should have expected some backlash due to the Bungie buyout, but other software companies can learn from these problems too. The moral of this story is: don't release information about a product until you are absolutely sure that the product is on schedule and is almost ready for release.

7. Finally, make sure that the quality of your products is up to par. This is a particularly important point when dealing with the Macintosh community, because they expect top-notch quality from their favorite computer company, and so they similarly expect top-notch quality from other software and hardware companies. Mac users are particularly annoyed with badly-designed products, and it's hard to recoup from an initial impression of a product. Take your time in developing the product, test it thoroughly, and then release it (keeping in mind the previous point of not hyping a product). Your customers will be much more grateful.

All in all, software companies have 7 potent methods of combatting piracy as described above, and 6 of them don't require locking up their software. Time after time it has been demonstrated that customers want good, well-designed products, and they want to use the software on their own terms, not to have the company dictate how they use them. So heeding the comments of their customers is the best thing software companies can do to combat piracy, because it is entirely in their hands to prevent their customers from becoming pirates.